Companies seeking to use H-1B visas may bump up against the fallout of a criminal investigation into whether an Indian outsourcing company sought business-traveler visas for contract workers instead of H-1B visas. The State Department has markedly increased its rejection rates for both types of visas, especially from India.

By Stephen Barlas

Tuesday, August 16, 2011

It looks increasingly likely that HR departments dependent on information technology, engineering and science employees from places such as India and China will see a constricted supply in the future.

That is because the State Department is becoming stingier with approvals of various varieties of business visas in the wake of allegations that major outsourcing vendor Infosys fraudulently applied for what are called a B-1 visas.

Typically, foreign outsourcing giants such as Infosys, Wipro, Satyam and Tata help Indian, Chinese and other international technical graduates come to the United States under the much more prevalent H-1B visa.

However, there is a per-country annual cap on H-1B visas, which are quickly exhausted each year. The B-1 is an alternative visa available to foreign workers who come to the United States temporarily, for business meetings, specific events, short-term training or contract negotiations.

In the case of B-1 visas, foreign employees are paid by the outsourcing firm, or perhaps its U.S. subsidiary, at rates prevalent in that country; so the cost to a company such as Microsoft, which outsources its desktop technical assistance through Infosys, is much cheaper than if they hired an American national for the same job.

The U.S. Department of Justice has issued subpoenas to Infosys in connection with a criminal grand jury investigation in a Texas federal district court. No charges against Infosys have been filed.

Jay Palmer, the Infosys employee stationed in Alabama who initially filed a whistleblower lawsuit against the company, initiated a civil suit in that state alleging illegal retaliation. The Texas case involves allegations of immigration fraud.

Kenny Mendelsohn, the lawyer for Palmer in Alabama, says, he and his client "have been contacted by numerous people telling us that other companies are committing the same violations. Also, comments to online articles and blogs are replete with people making similar accusations."

Infosys says it never used the B-1 visa program to circumvent the H-1B program. "We have made changes in our policies regarding immigration and visa requirements and we will continue to improve such policies as necessary to maintain the absolute best practices for compliance," the company states.

Regardless of the accuracy of Palmer's charges or the possible extent of B-1 visa fraud, the State Department has begun rejecting a much higher proportion of business visa applications.

There are no other criminal allegations other major U.S. companies or U.S.-based outsourcing companies that import substantial foreign technology workers are abusing B-1 or H-1B.

But the State Department is apparently markedly rejecting requests for both types of visas from foreign consulates, especially India.

"The Indian government and outsourcing companies have complained," says Ron Hira, associate professor of public policy at the Rochester Institute of Technology, who testified to the Senate Judiciary Committee in late July on the subject of visa fraud.

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The State Department has agreed to consider elimination of the particular B-1 visa that is at issue in the Infosys case (known as the B in lieu of H -- BiloH -- visa).

"We are in the process of discussing with the DHS removing or substantially modifying the B-1 in lieu of H guidelines," Joseph Macmanus, acting assistant secretary of state for legislative affairs, has written to Sen. Charles Grassley, the ranking Republican on the Judiciary Committee, who has publicly and repeatedly chastised Infosys.

Typically, a U.S. company who signs a contract with an outsourcing company is not aware of the legitimacy of the visa status of a B-1 or BiloH worker who begins work at a U.S. location.

Angelo Paparelli, a partner in the Immigration Practice Group of Seyfarth Shaw, says U.S. companies should include specific provisions in their contracts with outsourcing firms, such as prohibiting B-1 workers who hold less than a relevant master's degree or who are paid less than $60,000, and insisting that the outsourcing company have a formal immigration compliance program audited by a third-party.

Non-compliance with U.S. visa regulations should be listed as a condition for contract termination, he says.

Federal prosecution of visa fraud is rare but can be costly. The last such case ended in 2005 with Wal-Mart agreeing to pay $11 million as part of a settlement in a civil suit with the U.S. government. In that case, Wal-Mart hired foreign janitorial workers through contract companies located in the United States.